UAE records swift improvement in non-oil economy in May, says Emirates NBD
Fastest uplift in conditions in four months was driven by output and new order growth
The UAE’s non-oil private sector improved at the fastest rate in four months in May, driven by growth in output, new orders and employment growth, as well as strong demand from neighbouring GCC countries, according to the latest index from Dubai-based bank Emirates NBD.
The headline seasonally adjusted Emirates NBD UAE Purchasing Managers’ Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – rose to 56.5 in May, from 55.1 in April. The figure was indicative of a “sharp improvement” in business conditions – above the long-run average, the bank said.
“The strong PMI reading in May was partly due to a rebound in export orders - reflecting improved external demand conditions - as well as significant price discounting domestically,” said Khatija Haque, head of Mena research at Emirates NBD. “As a result, while the headline index shows strength in activity, profit margins remain under pressure.”
Emirates NBD said new export business reached a 30-month high alongside reports of stronger demand from neighbouring GCC countries. Firms surveyed for the latest report also reported the highest level of confidence in the market this year since the index began in 2012 – the result of more robust market conditions, new project wins and strong growth impetus linked to Expo 2020 Dubai, according to the bank.
Reflecting this renewed confidence, firms hired additional staff at the fastest pace in four months, according to the index. However, the rate of growth was only slight overall and below the long-run average, linked to cost optimisation by some firms.
Firms also reported a reduced level of input cost inflation in May, and lower staff costs and purchase price inflation contributed only to a modest increase in operating costs, Emirates NBD said.
There were also signs of rising backlogs of work in the non-oil private sector, with the current phase of build-up extended to 17 months. Firms linked this to strong inflows of new business. Companies also said they acquired additional stockpiles of goods in anticipation of rising output requirements.
Updated: June 5, 2018 12:14 PM